How to successfully acquire, create, and manage important documents for your freelance business
As a freelancer, you often serve as your own boss. For the creative personality, this can be incredibly freeing: you make your own schedule, choose your projects, and set your prices. However, handling certain core business functions — paperwork, documentation, and general organization — may not come as easily to you if you don’t already have a business background. And these functions are just as essential to freelance success as being a talented designer, a visionary creative, an effective communicator, or a versatile marketer.
Unless you plan to hire help to take certain tasks off your plate — an idea that has its merits as you grow your revenue — you’ll need to wear a lot of hats to make freelancing sustainable as a career. You will need to understand the legal and professional necessities of client interactions and build strategies for staying organized. Depending on your industry, you might need to maintain a professional license, register your business in order to pay taxes and handle finances, or even navigate local and national laws to gain permits and pitch projects to different clients.
Record-keeping and legal documents may not be as fun and exciting as the work that inspired you to take the freelance route, but the following tips and resources can help you build an achievable to-do list that will set you on the path to entrepreneurial success. From bringing your business idea to life — legally and officially — to acquiring and creating the essential documents you need to actually get to work and take on new projects, this guide will take you through the most common documents freelancers need to manage.
Documents you’ll need to acquire to launch your business
Your freelancing journey will likely begin with the legal formation of a business entity — even if you plan to do business under your own name. This business license will impact how you file income taxes, influence your ability to get business loans or a line of credit, and many other considerations for your new gig.
What you call your business will likely influence how you can market yourself or find new clients and customers. (Not to mention, it would be a shame to design your logo or write search ad copy only to find your preferred business name is taken!)
Along with the name and type of business you want to start, a license — and in some industries, you may need more than one — will help you cover some bases before you start providing services. Depending on the type of work you do and what your professional goals are, you may need various licenses, which will also need to be associated with the correct legal business entity to allow you to perform your work.
Although some freelancers — such as those practicing cosmetology — must acquire a business license, this step isn’t always necessary. Certain cities and states may also have licensing requirements, and you can check with your local government to determine yours. However, even if a business license isn’t required, it can still be helpful as a means of building business credit, developing a professional image, and protecting your personal property in the event of a lawsuit, among other benefits.
Before you apply for a business license, you’ll need to pick the appropriate business structure for your freelancing gig. This decision is also part of the process of choosing a name and building a brand.
The most common business structure types include:
- Sole proprietorship: This is a business structure that offers no distinction between the individual and the business itself. In some states, you may be required to register as a sole proprietor as a minimum qualification to act as a business, while in others no registration is required, and you will be considered a sole proprietor by default. A sole proprietorship may be a good option if you are just starting to freelance, intend to work in a very limited capacity as a freelancer, or are not yet certain of your long-term goals.
- Limited liability company: A limited liability company (LLC) structure allows the owner or owners to create a legal distinction between themselves and the business, while maintaining the ability to treat the business’s income directly as their own income for tax purposes. An LLC structure may be a good option if you want to keep your business operations simple, but appreciate having some legal distance between your business and yourself.
- Partnership: Like an LLC, a partnership allows you to create a legal distinction between the owners and the business, as well as treat the business’s income directly as personal income for tax purposes. Creating a business partnership is often a simple matter of registering your partnership according to state or city requirements and signing a partnership agreement. A partnership can be a good option if you intend to engage in a long-term business arrangement with another business entity
- C Corp: A C corporation allows you, as an owner or stakeholder of your business, to pay business taxes separately from personal taxes. This arrangement can be beneficial if corporate income tax would be lower than the personal income tax in your specific situation. However, the requirements for managing a C corporation can be complex if you don’t have a business or accounting background.
- S Corp: This structure allows business owners to treat the business’s income as personal income for tax purposes. However, in contrast to an LLC structure, registration as an S corporation allows you, as an owner, to be taxed as an employee of your business. Depending on the situation, this option may be cheaper than paying self-employment and income tax on all profits, as you would if your business were an LLC.
Depending on your line of work, it may be beneficial or necessary for you to acquire a professional certification. If you are just starting out, a certification can be essential for proving you are an expert, specialist, or otherwise recognized in your field. Earning a certification can also be a great way to expand your resume or position yourself for a career change.
For example, a freelancer working in the field of remote IT support may need a generalized IT support certification, but may further benefit from also acquiring a cybersecurity certification if they decide to delve into that particular niche. It is important to keep in mind, however, that certifications often require a fee and regular renewals, and they are not all created equal. Research all potential certifications carefully before paying for a certification program, to ensure the program is credible.
The parameters for necessary permits vary widely depending on your local laws, and therefore it is important to be aware of what your field or occupation requires based on where your business is located. You may also find certain clients expect specific permits or want your help on a permitted project. This is a highly individual situation that requires open communication and some amount of research, depending on what you do.
To learn more, check out these resources for business licensing and professional certification:
- U.S. Small Business Administration(Licenses and Permits): Get resources for finding appropriate licenses related to your business operations.
- U.S. Small Business Administration (Business Structure): Learn some of the more specific details about types of business structures.
- 6 Professional Certifications for Freelancers: Discover several reputable certifications that are beneficial to many freelancers, such as Adobe Certified Expert programs.
- How to Go from Lone Freelancer to Full-Fledged Entrepreneur: Get insight and advice on how to expand your professional endeavors as an entrepreneur.
- How to Start a Small Business: Follow this helpful step-by-step guide for how to start a small business.
Documents you’ll need to create and manage to grow your business.
Once you have all the documents required to start your freelance business, it’s time to begin building it. Assuming your marketing is on point and potential clients are calling, you will need to know how to create a project proposal. This is any sort of presentation you develop to demonstrate your vision for a project and outline necessary resources for its success. A proposal can help you demonstrate to new or prospective clients the value of your work, as well as ensure that everyone is on the same page regarding the expectations for a project before it is underway.
How to build a successful project proposal
Whether you present your proposal in person or in a virtual meeting, you will want to create a compelling presentation that shows you understand your client’s needs and have the expertise needed to solve them.
Regardless of the format you choose for your proposal, be sure to include these key elements to help you impress and connect with your clients:
- Provide a project synopsis that highlights the key points early in the proposal.
- Directly address the primary goals of the project and make it clear how you plan to achieve them.
- Get ahead of any concerns. Identify potential obstacles, and address them up front rather than waiting for the prospective client to ask about them.
- Offer a price quote for the work, which should breakdown all necessary costs and potential extras or overages.
Read these resources related to project proposals:
- How to Have a Successful First Conversation With a Prospective Client: Get useful tips for how to successfully engage with a potential new client.
- Writing an Estimate in 5 Steps: Quickly learn how to effectively prepare an estimate for a client.
- How to Create a Pitch Deck: Check out this article for tips on how to successfully develop a pitch deck.
- After the pitch meeting, send the client a digital copy of the proposal — ideally in a format that lets them easily insert comments and questions as they review the document.
Client contracts and agreements
A potential customer turns into a client based on your solid project proposal, and now you need a contract. Client contracts not only keep everyone involved in the project accountable, but also help you stay organized, as they outline all the terms and expectations related to the project. For this reason, it is important to ensure that both you and the client have copies of any contracts or agreements.
How to write a freelance contract
The details of a client contract will depend on the nature of the work and the needs and expectations of all parties involved. However, at minimum, a good client contract should include the following:
- The names and contact information of all parties.
- The date on which the contract is signed.
- Expected deliverables.
- Your duties (and the limitations on them).
- The amount and means of payment.
- The time frame for payment and recourse if the deadline is not met.
- Project deadlines that you, and your team if you have one, expect to meet.
- Details of ownership for the finished product.
- A limitation of liability clause (which restricts the amount of risk one party assumes in a contractual agreement).
- A termination clause (which provides the reasons under which a contract could be terminated).
- An indemnity clause (which allows for the transfer of risk between parties).
Obtain signatures from all relevant parties and keep a digital copy of the signed document in a secure location. You can offer your clients a seamless signing experience — and make your life easier as well — by using an e-signature solution tailored to small businesses, such as Acrobat Pro DC or Adobe Sign.
It will also be important to consider additional legal documentation in some scenarios. For example, in some cases, cooperation may be more easily achieved by sharing details of your business operation to some degree. In such cases, it may be prudent to ask the client to sign an NDA.
Check out these additional resources related to client contracts:
- The Freelancer’s Guide to Setting Perfect Deadlines: This article provides tips for how to set and keep deadlines for projects.
- Taking Control of Contracts: This article provides more in-depth tips for how to successfully develop a contract in tandem with a professional-client relationship.
- The Contract Provisions Every Creative Needs to Know: This article offers legal advice for freelancers developing a business contract.
Once a project is underway, client and project management is key to success. It also may be something to adjust and develop over time to fit your workflow and client needs. Generally speaking, good communication with clients is paramount. To keep your projects on track, it’s also essential to put in place digital document workflows that help you manage your work and streamline the client review and approval process.
Here are some smart approaches to client and project management:
- Create clear professional goals for yourself — and know your limitations in terms of how much work you can take on to ensure you hit the agreed-upon deadlines.
- Set and defend your boundaries when it comes to client expectations. Make sure your clients know what to expect in terms of project milestones, final deliverables, and ongoing communication. Find software that works best for you to help manage your work and important documents.
- Define a clear process for how and when clients will review your work and provide feedback — and use software that makes it easy for them to do so.
- Provide regular updates to the client throughout projects.
- Keep thorough records, including copies of any signed documents.
Check out these resources related to client and project management:
- Client Relationships: What To Do When Things Go Wrong: This article provides advice for what to do if you run into conflict with a client, especially if you have already provided them with the promised deliverables.
- How Productive Creatives Manage Their To-Do Lists: This article provides tips for schedule management from creative professionals.
- How to Avoid Freelancer Burnout: 6 Tips: This article provides tips for how to develop your freelance work schedule in a way that can help reduce the effects of burnout.
Billing and receipt of payment records
To freelance successfully, you will need to carefully manage documents relating to billing and payment.
Setting your rates
Before you even begin freelancing, you need to determine your rates. This can be a difficult decision to make and there is no way to magically find the perfect number. However, the following steps can help you zero in on a good general range:
- Check median rates for similar jobs in your area using resources like Glassdoor and Indeed.
- Ask for the feedback of others in your field. Consider resources such as forums, social media, or a local college.
- Know your relative skill level. If you are just starting, you should be on the lower end of the typical pricing range.
- Start with an optimistic (but reasonable) pricing structure. Assess how sensible your client pool seems to find these rates and adjust as needed.
An invoice is an overview of the work you have provided and the payment you expect for these products or services. It is usually best to use a template to write an invoice. You can find invoice templates online, but they are also typically offered with office software. Once you’ve received a payment, you should create a receipt. Both you and the client should keep copies of invoices and receipts of payment.
Here are resources related to navigating payment as a freelancer:
- How Creatives Can Beat the Torturously Slow Payment Process: This article provides tips for how to ensure that you can receive payment on time as a freelancer.
- Truly Small: This website offers free invoice templates.
- How to Write a Receipt of Payment: This article provides tips for how to properly write a receipt.
Documents you’ll need to manage and file with the IRS
Tax management documents
Freelancers need to contend with many unique tax considerations. The specific processes will depend on unique factors such as your chosen business structure and where you live. The following information is primarily geared toward freelancers based in the United States.
First and foremost, as a freelancer, it is imperative that you carefully document your income. You can do this by keeping copies of invoices and receipts, as well as gradually inputting relevant information from these documents into a spreadsheet or online business management tool.
Quarterly vs. annual taxes
In most traditional workplaces, employees file taxes annually, as their tax liability is prepaid through withholdings. Freelancers, however, are typically required to both file taxes annually and pay estimated taxes quarterly.
In the United States, freelancers must calculate and file self-employment tax — consisting of Social Security and Medicare taxes — using Form 1040. The self-employment tax takes the place of similar withholdings for traditional employees.
Common tax documents that freelancers will need use include:
- 1099-MISC: This is essentially the equivalent of a W-2 for traditional earners — a listing of your earnings.
- 1040-ES: This is a form used to file estimated federal tax, which the typical freelancer will need to file quarterly.
- Schedule C Forms: This form is used to calculate and file net profit or loss for a sole proprietorship.
Deductions and write-offs
Write-offs — business expenses deducted for tax purposes — may apply when managing your taxes. Every freelancer’s situation is unique. However, generally speaking, you can write off an expense that is necessary for the pursuit of your income.
Common expenses that can be written-off by freelancers include:
- Home office items
- Health insurance premiums
- Business insurance
- Work-related travel expenses
- Retirement contributions
- Advertising expenses
- Internet costs
- Transaction fees
- Start-up costs
- Business licenses
Here is more help on tax management for freelancers:
- W9 Tax Forms: Simplifying the Process: This article breaks down what a W9 is and how to handle it.
- IRS Self-Employed Individuals Tax Center: This IRS resource is built to accommodate and support self-employed individuals.
- Tax Tips for Freelance Creatives: Debunking Common Myths: This article explores common misunderstandings about tax management that are very applicable to freelancers.
- And the following sites provide various resources for freelancers managing their own businesses: Freelancers Union: This is an advocacy resource for freelancers.
- National Association for the Self-Employed: This resource helps entrepreneurs develop their businesses.
- The 99U Guide to Money: This is a compilation of financial information related to professional endeavors.
- Black Freelance: This is a resource that provides various avenues of support for Black freelancers.
Doing freelance or contract work can be an invigorating personal investment and a great way to grow your career. Although managing your freelance finances can feel intimidating, with the right resources, you can confidently pursue the freedom and success of managing your own business.